US ‘fiscal cliff’ deal called a dud on deficit front

Updated 03 January 2013
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US ‘fiscal cliff’ deal called a dud on deficit front

WASHINGTON: In the controversy surrounding the “fiscal cliff” issue, it’s easy to forget that the origin of the entire debate was a professed desire to reduce swollen federal deficits.
Whether the target was $ 4 trillion over 10 years, as proposed by the Bowles-Simpson deficit reduction commission, or in the $ 2 trillion range, as tossed around by House of
Representatives Speaker John Boehner and President Barack Obama, the idea was to rein in total debt that now tops $ 16 trillion.
By those standards, the bill passed by the US Senate to avoid the cliff’s automatic steep tax hikes and across-the-board spending cuts, looks paltry indeed. The House of Representatives voted for the bill late on Tuesday.
The legislation would add nearly $ 4 trillion to federal deficits over a decade compared to the debt reduction envisioned in the extreme scenario of the cliff, according to the non-partisan Congressional Budget Office.
This is largely because it extends low income tax rates for nearly every American except the relative handful above the $ 400,000 threshold.
It’s also because it put off for at least two months the automatic budget cuts that were part of the cliff and would have saved about $ 109 billion in federal spending on defense and non-defense programs alike.
The Senate bill, which ultimately came down to a fight about tax equity rather than federal spending, did to deficit reduction what Obama and congressional leaders always promise to resist: It “kicked the can down the road” to a later date.
In explaining the measure to the news media, the White House, which helped broker it, gave no particular figure for how much it would bring down the deficit, stating only that,
somehow, “with a strengthening economy,” it would.
Whether it ultimately succeeds will depend in part on what happens to the now-delayed “automatic” spending cuts, including whether Obama follows through on reductions in outlays.
The Senate bill also sets up what is likely to be an even more heated fight in late ebruary when the Treasury Department must come to Congress to seek an increase in the government’s borrowing limit.
That will bring everything full circle to where the cliff originated during a struggle between Obama and Republicans over raising the federal debt ceiling above $ 14.5 trillion.
That struggle ended in August, 2011 with a bipartisan deal designed to scare Congress into legislating significant long-term cuts in federal spending.
The idea was that by setting a strict deadline of Jan. 2, 2013 and dire consequences in the form of draconian spending cuts for failing to meet it, the White House and Congress would be forced into action.
Republican Representative Paul Ryan, a self-described deficit hawk who served as the Republican vice-presidential candidate, declared the moment a “huge cultural change.”
Coincidentally, low tax rates that originated during the administration of President George W. Bush were also set to expire on Dec. 31, making the prospect of inaction so threatening that the Congressional Budget Office determined that failure to intervene could cause a new recession.
But the controversy over taxes, coming on the heels of a presidential campaign built around Obama’s demand for middle-class tax justice, ultimately consumed the argument over the cliff, leaving deficit reduction as the forgotten issue.
Among those disappointed by the process was Alice Rivlin, a Brookings Institution scholar, former US budget director and co-author of another widely discussed deficit reduction plan named for herself and former US Senator Pete Domenici, a Republican from New Mexico.
“I’d been optimistic,” Rivlin said in an interview with Reuters. “I thought that we might get might get it done” and that Boehner and Obama “might get to a grand bargain.”
Maya MacGuineas, a budget hawk who has led a group of corporate chieftains in a group called “Fix the Debt,” was also unenthusiastic about the bill.
“This is one of the lowest common denominator deals,” MacGuineas s aid. “I wish I had something nice to say, but not so much.”


Power-sucking Bitcoin ‘mines’ spark backlash

Updated 31 min 36 sec ago
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Power-sucking Bitcoin ‘mines’ spark backlash

  • Local US authorities pushing back against bitcoin miners as power prices rise
  • Firms insist they bring revenue, investment and talent to mining locations

NEW YORK: Bitcoin “miners” who use rows of computers whirring at the same time to produce virtual currencies began taking root along New York’s northern border a couple of years ago to tap into some of the nation’s cheapest hydroelectric power, offering an air of Silicon Valley sophistication to this often-snowy region.
But as the once-high-flying bitcoin market has waned, so too has the enthusiasm for bitcoin miners. Mining operations with stacks of servers suck up so much electricity that they are in some cases causing power rates to spike for ordinary customers. And some officials question whether it’s all worth it for the relatively few jobs created.
“We don’t want someone coming in, taking our resources, not creating the jobs they professed to create and then disappear,” said Tim Currier, mayor of Massena, a village just south of the Canadian border, where bitcoin operator Coinmint recently announced plans to use the old aluminum plant site for a mining operation that would require 400 megawatts — roughly enough to power 300,000 homes at once.
In Plattsburgh, where two cryptocurrency operations have been blamed for spiking electricity rates, the prospect of more cryptocurrency miners plugging in spooked officials enough in March to enact an 18-month moratorium on new operations. The small border village of Rouses Point also is holding off on approving new server farms and Lake Placid is considering a moratorium.
For local officials, the power struggle has been a crash course in the esoteric bitcoin mining business in which miners earn bitcoins by making complex calculations that verify transactions on the digital currency’s public ledger.
Since it often uses hundreds of computers that throw off tremendous heat and burn a lot of power, it has tended to gravitate toward cooler places with cheap electricity, such as geothermal-rich Iceland or along the Columbia River region of Washington state.
The stretch of New York near the Canadian border similarly fits the bill. Cheap hydropower from a dam spanning the St. Lawrence River is doled out by a state authority to local businesses that promise to create jobs. Additionally, some municipalities such as Massena and Plattsburgh receive cheap electricity from a separate hydropower project near Niagara Falls.

 

In Plattsburgh, electricity is so cheap most residents use it instead of oil or wood to heat their homes. The couple of commercial cryptocurrency mines here can get an industrial rate of about 3 cents per kilowatt hour — less than half the national average.
But Plattsburgh Mayor Colin Read said its largest operator, Coinmint, which has two plants employing 20 or fewer people, can consume about 10 percent of Plattsburgh’s 104 megawatt cheap electricity quota. When the city exceeded its allocation like it did this winter, customers ended up paying $10 to $30 more a month for the extra electricity. For a major employer like Mold-Rite Plastics plant, it cost them at least $15,000 in February.
State regulators have since given municipal utilities the ability to charge higher rates to cryptocurrency miners. At least one bitcoin miner in Plattsburgh says he’s working with the city on solutions to the power worries.
Ryan Brienza, founder and CEO of the hosting company Zafra, said those could include mining on behalf of the city for an hour a day or harnessing the heat from mining computers to warm up large spaces.
While the direct number of jobs associated with mines can be small, Brienza said they can bring revenue, investments and talent to the city while employing local contractors.
“It can start snowballing,” Brienza said.
Coinmint’s plans for a new plant in Massena, for example, come with a promise of 150 jobs. That’s welcome in an area that in the past decade has suffered though the loss of aluminum-making jobs and the closure of a General Motors powertrain plant.
“J-O-Bs. Yup. What we need up here,” said Steve O’Shaughnessy, Massena town supervisor.
Coinmint had asked for a cheap power allocation from the New York Power Authority for Massena for part of its energy needs, but that request was deferred.
The power authority has separately enacted its own moratorium on allocating hydropower to cryptocurrency operations — mirroring municipalities that have effectively pushed the “pause” button on a rush of miners coming in.
Coinmint representatives said this month they hope to begin the Massena operation in the second part of this year. The company stressed that mines can be a good fit for this job-hungry area.
“They’re also going to get substantially more efficient over time,” said Coinmint spokesman Kyle Carlton. “So to the extent that Plattsburgh or Massena or anybody else can get in on that and establish themselves on the ground floor, I think that’s going to help those cities to be successful.”

Decoder

Bitcoin mining is the process used to verify transactions and add them to the currency's public ledger (blockchain). It involves compiling pending transactions and turning them into a computationally difficult, mathematical puzzle. The first computer to solve the puzzle claims a transaction fee and a newly-released bitcoin.